NEXTDC reports bumper 1H19 half year results

NEXTDC Limited today announced its financial results for the half-year ended 31 December 2018 (“1H19”) and confirms its FY19 EBITDA expectations.

1H19 financial highlights

• Revenue¹ up 17% to $90.8 million (1H18: $77.5 million)
• Underlying EBITDA^1,2,3, up 26% to $42.2 million (1H18: $33.6 million)
• Statutory net loss after tax of $(3.1) million (1H18: net profit of $8.4 million)
• Issued a further $300 million in unsecured notes (“Notes IV”)
• Liquidity (cash and undrawn debt facilities) of $644 million at 31 December 2018

NEXTDC Chief Executive Officer and Managing Director, Craig Scroggie, commented on the 1H19 results: “Today’s record results are testament to NEXTDC’s strong fundamentals reflecting the inherent operating leverage of the business. The first half also reflects a record period for new investments in both the development of our next generation of world class Tier IV data centres and our innovative connectivity service offerings.”

Business performance

As at 31 December 2018:

• Contracted utilisation up 11.1MW (28%) to 50.4MW (31 December 2017: 39.2MW)
• Customers up 215 (25%) to 1,090 (31 December 2017: 875)
• Interconnections⁴ (cross connects) up 2,526 (34%) to 9,982 (31 December 2017: 7,456), representing 7.7% of recurring revenue (1H18: 6.2% of recurring revenue)

During 1H19, NEXTDC secured its largest ever single contractual commitment at S2 and subsequently chose to advance the development of an additional 8MW of capacity, which remains under construction.

Commenting on the Company’s sales performance, Mr Scroggie said:

“NEXTDC achieved an unprecedented level of sales in the first half, with a total of 10.1MW of new capacity contracted as well as the addition of more than 1,300 incremental interconnections. These results demonstrate the strength of the Company’s market presence and serve to underpin further strong growth in revenues and earnings in future periods.”

Development activity

• S2 was opened for early customer access during 1H19 with further development ongoing
• P2 microsite and connectivity hub was opened in 1H19 to facilitate early access to the Indigo subsea cable system as well as other telecommunications and cloud infrastructure providers in the West Australian market
• P2 ground works begun for the new 20MW Tier IV site
• B2 expansion of the second data hall was undertaken and subsequently completed
• M2 capacity expansion of the third and fourth data halls were undertaken and due for completion in March 19
• S3 pre-development application was made for the new Tier IV 80MW site in Gore Hill
• M3 negotiation on the final preferred sites is ongoing and expected to complete in 2H19, this acquisition was delayed due to the Victorian Government State elections
• ONEDC – delivered two major releases providing customers with Intelligent Service Management and enhanced data centre intelligence capabilities
• Business transformation – delivered first phase of Quote to Cash (QTC) program providing an integrated and automated order management/provisioning and invoice production platform
• Establishment of our new NEXTDC Singapore entity, establishment of the first regional Asia office and the appointment of both Non-Executive Chairman of Asia and regional Chief Operating Officer for business and corporate development, Government engagement and future potential data centre site selection activities.

Acquisitions

• NEXTDC completed the takeover of the Asia Pacific Data Centre Group (ASX: AJD or “APDC”) including the underlying data centre properties P1, M1 and S1 during the half for an underlying valuation of $261 million
• NEXTDC also acquired the B1 data centre property for a total cost of $24 million
• The above mentioned property purchases are complementary to NEXTDC’s existing data centre operations

Setting new industry standards

• B2 received the Tier IV Gold Certification of Operational Sustainability, becoming the first data centre in the Southern Hemisphere to receive this recognition from the Uptime Institute
• In partnership with network partner Superloop, the new Indigo subsea cable system is on track for completion in 2H19, offering Australia’s fastest network route to Asia from Singapore to P2 Perth and S1 Sydney
• M1 Melbourne successfully achieved a NABERS 5-star rating for energy efficiency for data centre facility, the first colocation data centre in Australia to achieve a 5-star rating
• B2, M2 and S2 have been designed to a superior level of energy efficiency across our entire second-generation footprint that is equal to or greater than NABERS 5-star standards recently certified at M1
• B2 Brisbane was awarded the Australian Master Builders best commercial building between $5M - $50M
• NEXTDC won the APAC 2018 Operations Team of the Year award at the Data Center Dynamics Awards in Singapore
• NEXTDC won the Global 2018 Operations Team of the Year award at the Data Center Dynamics Awards in London
• NEXTDC won the Global 2018 Design Team of the Year award at the Data Center Dynamics Awards in London
• NEXTDC became the first data centre operator in Australia to have its corporate operations certified as 100% carbon neutral under the Australian National Carbon Offset Standard (NCOS)
• NEXTDC signed and subsequently announced its sustainability partnership with Qantas Future Planet
• NEXTDC partnered with Alibaba Cloud, the cloud computing arm of Alibaba Group, to deliver direct access to China’s largest public cloud provider
• NEXTDC partnered with Microsoft to deliver a new ExpressRoute^TM hosting location at P1

Commenting on the Company’s achievements in development activities and setting new industry standards, Mr Scroggie said: “We are incredibly proud of these outstanding achievements. Over the past six months NEXTDC has set a number of new operational benchmarks as well as raising the bar in sustainability leadership as we continue to demonstrate excellence across our environmental standards. Our dedication to innovation in engineering, championing operational excellence and driving sustainability leadership is core to NEXTDC’s values.”

FY19 guidance

NEXTDC’s takeover of APDC along with the purchase of the underlying B1 property has resulted in approximately $15m in annualised rent savings (before taking any rent escalators into account). At the same time, lower interest income on cash deposits as well as reduced distributions received from NEXTDC’s interest in APDC are expected to reduce FY19 revenue by $2m to $3m. As a result, NEXTDC has updated its revenue guidance for FY19, though it is worth noting that under the current accounting standards, none of this reduction in expected revenue or annual rental saving has an impact on underlying EBITDA. Accordingly, based on 1H19 performance, the impact of the APDC and B1 property acquisitions, current utilisation levels as well as expected new customer contracts in 2H19, NEXTDC provides the following guidance for FY19 :

• Revenue in the range of $180 million to $184 million (FY18 pro forma: $156.3 million)
• Underlying EBITDA^2,3 in the range of $83 million to $87 million (FY18 pro forma: $75.6 million⁶)
• Capital expenditure between $430 million to $470 million (FY18: $285 million)

For full details read the ASX announcement and view the 1H19 half year results pack